Security National Bank v. Lish
| Decision Date | 03 December 1973 |
| Docket Number | No. 7024.,7024. |
| Citation | 311 A.2d 833 |
| Parties | SECURITY NATIONAL BANK, Appellant, v. Jacob C. LISH, Appellee. |
| Court | D.C. Court of Appeals |
Leonard C. Collins, Washington, D.C., for appellant.
John J. O'Neill, Jr., Washington, D. C., for appellee.
Before KELLY, FICKLING and HARRIS, Associate Judges.
Security National Bank (Security) sued appellee Lish, an attorney, for losses sustained on a loan which had been made by the bank to a third party. The trial court granted defendant's motion for summary judgment, based upon the fact that no attorney-client relationship existed between Security and Lish.1 We reverse.
In the fall of 1969, Lish represented A. Bolling Newsome, as well as Newsome's then-employer which did business with Security. Lish is an attorney of considerable experience, and he was well known to officials of the bank through prior transactions. Newsome wanted to borrow $25,000, and circumstances led him to seek a personal loan in that amount from Security.
As collateral for the loan, Newsome offered his partial interests in certain real property. Lish apparently believed that Newsome was in a position to execute valid second trust instruments to secure the loan, and that belief was conveyed by him to Security.2 The bank made the $25,000 loan to Newsome without having a title search made. A few days thereafter, Lish wrote the bank confirming that it was the holder of a second trust on one piece of property and, with respect to a second piece of property, that there was only a $1,000 second trust balance standing between the first trust and Security's interest.3
Newsome defaulted on the loan, whereupon it came to light that there had been a previously existing $12,000 second trust on one piece of property which was superior to Security's interest. When the dust finally settled, Security had lost $7,500 on the transaction. It wrote off $1,500 of that amount as uncollectible, and sought recovery of the remaining $6,000 from Lish.
The trial court's granting of the motion for summary judgment was based upon "the undisputed facts that plaintiff did not employ defendant to search the title, and that a lawyer-client relationship did not exist between Security National Bank and the defendant". That finding appears to be factually accurate, but it does not follow that Lish thereby became insulated from possible liability as a matter of law.
It is obvious that an attorney does not owe members of the general public the same duty which he owes to his client. National Savings Bank of the District of Columbia v. Ward, 100 U.S. 195, 25 L.Ed.
621 (1880). However, in appropriate circumstances, an attorney is not exempt from the general principle that "one who assumes to act, even though gratuitously, may thereby become subject to the duty of acting carefully, if he acts at all." Glanzer v. Shepard, 233 N.Y. 236, 135 N.E. 275, 276 (1922).
One engaged in supplying information has a duty to exercise reasonable care. Generally, this duty does not extend beyond one's employer. Ultramares Corp v. Touche, 255 N.Y. 170, 174 N.E. 441 (1931). However, there is a recognized exception to this general rule. Where information is supplied directly to a third party (or indirectly for the benefit of a specific third party), then the same duty of reasonable care exists, notwithstanding a lack of privity. Glanzer v. Shepard, supra. The validity of the principles enunciated by Justice Cardozo in the Ultramares and Glanzer cases was recognized by this court in Long v. American Savings & Loan Association, D.C.Mun.App., 151 A.2d 770 (1959). See also Restatement of Torts § 552 (1939); Prosser on Torts § 107 (4th ed. 1971).
In Long, supra, this court applied the general rule, holding that a title company employed by a savings and loan association was not liable for negligence to one who applied to...
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